Third Party Logistics Providers Growing

Filed in archive Supply Chain on July 6, 2005

Back in November, I noted a research study saying the number one IT need that companies expected from their third party logistics providers was a big one: RFID.

It's an even bigger story than I first realized, because of the fast growth of the third party logistics industry. This growth trend is being fueled in part by global outsourcing. As companies source more of their manufacturing outside the U.S., but need quick shipping times back to and within the U.S., the need for third-party warehouses and distribution centers has jumped.

An article in yesterday's Wall Street Journal points out this growth trend:

"Columbus, Ohio -- In a cavernous building here, workers speed around on motorized vehicles between rows of cardboard boxes. They rise up on hydraulic lifts to reach the tops of stacks stretching 28 feet high. A man on a foot-powered scooter races to check inventories of products ranging from DVD players to antiwrinkle cream and heart-surgery devices. Forklift drivers honk as they make their way across the dusky building the size of five football fields.

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Such omnibus facilities are increasingly important way stations in the global, just-in-time economy. Cost-cutting and shifting of production offshore are driving growing numbers of manufacturers, retailers and suppliers to outsource their warehouses and distribution needs to the $89.4 billion third-party logistics industry. Revenue for the U.S. warehouse and logistics sector increased 16.3% last year, according to Armstrong & Associates Inc., a consulting company in Stoughton, Wis. More than 80% of the country's 100 biggest companies use third-party logistics providers such as ODW. As ODW shows, such growth and the mounting expectations for global sourcing and delivery make for a daily high-wire act. Its customers count on ODW and its rivals to help get parts and finished goods from factories on one side of the world to stores and consumers on the other -- on time and in the right quantities. In the meantime, lead times to ship goods out have shrunk. And key staffers such as truck drivers are in short supply."

Read the whole thing at the Wall Street Journal.